Anti-corruption?Political Connection And Stock Returns

The fight against corruption has become a political hot spot in China. According to the Central Commission for Discipline Inspection of the notification, the central "eight regulations" has been introduced for three years, and 140 thousand people have been treated, and nearly half of them faceed serious disciplinary or administrative disciplinary measures.In theory, Mauro (1995) proved that corruption has a negative impact on macroeconomic development and growth, and by the late 1990s, Watt et al. concluded:level of corruption on economic development and average annual economic growth rate had a negative impact according to the World Bank (1997) survey. Based on such studies, " corruption is benefit" which has been claimed in the 1960s is no longer recognized. From the visual point of view, affected by the anti-corruption, companies get access to a good market environment, reduce the cost of its production and operation, improve product quality, increase social reputation, and ultimately increase enterprise value, investors generally regain market environment confidence.In this paper, we use the event study methods to explore the impact of anti-corruption actions of officials being investigated for publishing events to enterprise value of listed companies as well as intrinsic motivation. Firstly, we make the officials jurisdiction areas corresponding to the listed company registration, and then observe the reaction of officials under the jurisdiction of regional stock markets during the information of the officials being investigated.Then, we make political connection as a dummy variable, and regress enterprise value to explore whether the underlying causes of anti-corruption have an impact on the enterprise value is loss of political connection; Thirdly, we will discuss the different manifestations of state-owned enterprises and non state-owned enterprise value in anti-corruption activities; this paper will also examine whether the quality of government control impact on enterprise value in anti-corruption activities; in addition, the paper will distinguish officials' administrative level to observe different performance of enterprises'value under different levels of officials in the anti-corruption activities.We find that during the releasing of the officials'investigation information in the course of the official anti-corruption. The capital markets for different events windows get significantly positive cumulative average excess returns, which indicates that anti-corruption action formed a larger good to overall investors. And we also get conclusions as following:First, the companies without political connections get a better performance in stock market than companies with political connections during the releasing of the officials'investigation information in the course of the official anti-corruption. Second, state-owned enterprises get a better performance in stock market than non state-owned enterprise. Third, companies in government of better quality have better performance in stock market in the course of the official anti-corruption. Fourth, when the information of officer being investigated releases, if officials involved have higher administrative level, companies in these jurisdiction in the capital market will get a higher cumulative abnormal returns.